Chapter 16

Question 1

Non-current asset

Answer 1

A present economic resource controlled by the entity as a result of past events and are expected to be used by the business for a number of years and are not held for the purpose of resale
E.g. vehicles, equipment, premises, shop fittings, laptop, desk

Question 2

Cost of a non-current asset

Answer 2

Purchase price + all cost incurred in order to bring the asset into a location and condition ready for use, which will provide a benefit for the life of the asset.
E.g delivery costs, modification costs, stamp duties and installation costs
Not included: maintenance fees, insurance, servicing, cleaning fees

Question 3

Cash purcahse of a non-current asset: effect on accounting equation

Answer 3

Assets: Overall Decrease (Decrease Bank, Increase (non-current asset name), Increase Other fees (list as different items))
Liabilities: Decrease GST Payable
No effect on OE

Question 4

Historical cost

Answer 4

The cost of the asset when purchased adn can be verified by source document evidence.

Question 5

Fair value

Answer 5

The price of an asset contributed by the owner that would be received if that asset was sold at the time it was acquired by the business.